Investing in the current market?

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
Post Reply
User avatar
bligh
Posts: 553
Joined: Wed Jul 27, 2016 9:13 pm

Investing in the current market?

Post by bligh » Fri Dec 16, 2016 1:27 pm

So just a couple of days back John Bogle himself states "It looks like a risky time to me: Stocks are fully priced".

It is obvious the US market is priced higher than historical norms. There is also a huge overhang of political, economic and social uncertainty with an administration that is for better or worse, very unpredictable.

Europe, Japan and China, the two other major regions by stock market cap all have issues as well. China's debt fueled housing bubble is especially concerning to me, due to how it echoes the Japanese and US housing bubbles.

Bonds don't look so tempting with the expectation of rising interest rates. I could go short and limited term, but the returns aren't all that great there. Real estate isn't going to do great with rising interest rates. Unless there is significant inflation for which it will probably stay a good hedge.

I have seen a couple of posts on this board from people who are tempted to either increase cash on hand, or bond allocations of late. I have to admit, I am tempted to do the same. I haven't done so because it feels like market timing to me. I am trying to justify it in other terms but coming up short. My IPS is simple and does not address how I feel about markets being overvalued, or post crash. It is basically to continue to plow in money into the markets as and when it becomes available. So that is what I have been doing.

Basically it feels like a poor time to be investing money in just about everything. So far I have been just ignoring this, and continuing to plow in more money as always. Do all of you do the same? Just look at the market, say "wow the stock market seems over valued, the bonds are probably going to return pretty poorly over the next couple of years, oh well." and buy anyway? Just expect to get crappy returns on it over the next 10 years?

boglephreak
Posts: 441
Joined: Fri Apr 22, 2016 5:16 pm

Re: Investing in the current market?

Post by boglephreak » Fri Dec 16, 2016 1:30 pm

whats the alternative? not investing in the current market seems a worse choice than investing in the current market. unless you have debt, then at least you have a reasonable alternative.

livesoft
Posts: 56606
Joined: Thu Mar 01, 2007 8:00 pm

Re: Investing in the current market?

Post by livesoft » Fri Dec 16, 2016 1:32 pm

I do follow my Investing Policy Statement and the asset allocation stated therein, so if that's what you mean by "do the same", then I do the same.

I just rebalanced some money into bonds. Instead of thinking, "Wow, bonds will do crappy next year", I was thinking, "Wow, I just avoided a 4% drop in bonds since summer by waiting to rebalance after the FOMC meeting."
This signature message sponsored by sscritic: Learn to fish.

NotWhoYouThink
Posts: 1348
Joined: Fri Dec 26, 2014 4:19 pm

Re: Investing in the current market?

Post by NotWhoYouThink » Fri Dec 16, 2016 1:36 pm

Every time I have ever invested, it has been in the market that was current at that time. Stocks high or low, bond yields high or low. Plan the investments, invest per the plan, and let the market do what it will.

User avatar
whodidntante
Posts: 2203
Joined: Thu Jan 21, 2016 11:11 pm

Re: Investing in the current market?

Post by whodidntante » Fri Dec 16, 2016 2:23 pm

It just so happens that my portfolio was well positioned for this market move, so I'm pretty happy right now. I reached a specific wealth goal earlier than I anticipated. I've sold a small amount to satisfy my need to "do something." A small sin, perhaps. Maybe do that.

J295
Posts: 1176
Joined: Sun Jan 01, 2012 11:40 pm

Re: Investing in the current market?

Post by J295 » Fri Dec 16, 2016 2:26 pm

I follow our IPS (which doesn't allow for changes without a 3 month waiting period ... and thus far we've never changed it). This avoids the questions you raise.

Before we had an IPS we acted on emotion at times (typically fear or greed -- each of which results in a more charitable term: "market timing"), which is not a very favorable model.

If you don't have an IPS I would suggest this gnaw you have now is a prompting to strongly consider forming one.

Best regards.

Fallible
Posts: 6125
Joined: Fri Nov 27, 2009 4:44 pm
Contact:

Re: Investing in the current market?

Post by Fallible » Fri Dec 16, 2016 2:27 pm

bligh wrote:...
I have seen a couple of posts on this board from people who are tempted to either increase cash on hand, or bond allocations of late. I have to admit, I am tempted to do the same. I haven't done so because it feels like market timing to me. I am trying to justify it in other terms but coming up short. My IPS is simple and does not address how I feel about markets being overvalued, or post crash. It is basically to continue to plow in money into the markets as and when it becomes available. So that is what I have been doing. ...


If your IPS says to keep investing available money in the market, then that seems to implicitly say to ignore the market's short-term noise and what you guess it might mean. If that's the case, it could help to have the IPS explicitly address how you feel about the current market and a post crash, which should also be addressed in your asset allocation.
Bogleheads® wiki | Investing Advice Inspired by Jack Bogle

Rodc
Posts: 13601
Joined: Tue Jun 26, 2007 9:46 am

Re: Investing in the current market?

Post by Rodc » Fri Dec 16, 2016 4:38 pm

If you are young most of your investing is yet to come so this is not a big deal.

If you close to retirement or in retirement the run up has likely reduced your need to take risks because you have more money than you reasonably expected and you could consider a lower risk portfolio, taking some of the extra to buy a SPIA, etc.

Frankly, not surprising, nothing seems particularly better at the moment that anything else (the normal situation) so mostly full steam ahead. Just don't count on high returns from here. But then counting on high returns is rarely a good idea in any condition.

Best of luck to us all.
We live a world with knowledge of the future markets has less than one significant figure. And people will still and always demand answers to three significant digits.

Saphomd
Posts: 165
Joined: Tue Apr 03, 2012 6:11 pm
Location: SF, CA

Re: Investing in the current market?

Post by Saphomd » Fri Dec 16, 2016 4:53 pm

I am in my early 50's and my AA with Vanguard is 75/25. Yes , it is risky to have that much in stocks but I plan to rebalance before this year is over. I plan to increase my bond portion to at least 40%. If I rebalance by taking out from my VG 500 index (taxable account) into my Total Bond Market index (in a Roth), then I will have to pay taxes on capital gains. I definitely need more bond exposure.

ugaDAWGS09
Posts: 310
Joined: Wed May 15, 2013 4:34 pm

Re: Investing in the current market?

Post by ugaDAWGS09 » Fri Dec 16, 2016 5:20 pm

I've always maxed out my Roth IRA in January, but honestly it may be a little harder to pull the trigger with the DOW hovering around 20k. I'm young so I know they say it doesn't make a difference, but it does make it more difficult to invest a lump sum with the markets are at all time highs. I have to do a backdoor Roth each year so I go ahead and do mine and my wife's at the same time to make it easier to help me keep everything straight.

User avatar
bligh
Posts: 553
Joined: Wed Jul 27, 2016 9:13 pm

Re: Investing in the current market?

Post by bligh » Fri Dec 16, 2016 5:38 pm

I keep going back and forth. I think I will just stay the course. Keep adding money into the portfolio as much as I can, regularly each month. What is the worst that can happen? Market tanks 40%? I will just keep rebalancing and if I feel particularly greedy also reduce my bond allocation by 5 or 10%. :greedy

"Damn the torpedoes, Full speed ahead!"

User avatar
TinkerPDX
Posts: 231
Joined: Sun Jun 08, 2014 4:38 pm

Re: Investing in the current market?

Post by TinkerPDX » Fri Dec 16, 2016 5:47 pm

When having such worries myself, I always remember this bit, http://awealthofcommonsense.com/2014/02/worlds-worst-market-timer/, about the returns you'd have gotten had you bought in only at peaks before crashes of the last 45 years. The conclusion is that as long as you never panic and sell, it's still a winning game (provided a long enough time horizon).

So buy according to plan, and brace for the grit and discipline required not to sell against your IPS when the inevitable painful drops come.

User avatar
Nosferatu
Posts: 115
Joined: Wed Feb 21, 2007 9:07 am
Location: Michigan

Re: Investing in the current market?

Post by Nosferatu » Fri Dec 16, 2016 5:56 pm

bligh wrote:So just a couple of days back John Bogle himself states "It looks like a risky time to me: Stocks are fully priced".
<snip>


When are stocks not fully priced?

User avatar
9-5 Suited
Posts: 144
Joined: Thu Jun 23, 2016 12:14 pm

Re: Investing in the current market?

Post by 9-5 Suited » Fri Dec 16, 2016 6:58 pm

I find that taking an extended view of stock values back 100 years or so is always instructive.

The huge disasters start to look like blips. You have to squint to see them on this long increasing line.

Yet think about what happened during those 100 years! Two freakin world wars! Vietnam! Oil crises! Listen to that great Billy Joel song We Didn't Start the Fire for more.

Point is, there is always a reason to be a chicken little, but historically no benefit to being one.

frugalecon
Posts: 226
Joined: Fri Dec 05, 2014 12:39 pm

Re: Investing in the current market?

Post by frugalecon » Fri Dec 16, 2016 7:14 pm

9-5 Suited wrote:I find that taking an extended view of stock values back 100 years or so is always instructive.

The huge disasters start to look like blips. You have to squint to see them on this long increasing line.

Yet think about what happened during those 100 years! Two freakin world wars! Vietnam! Oil crises! Listen to that great Billy Joel song We Didn't Start the Fire for more.

Point is, there is always a reason to be a chicken little, but historically no benefit to being one.


Indeed, I am old enough to remember 1987, even though I had no money to invest then. On a graph of stock market performance over time, it doesn't look as menacing as I thought it was. It is interesting to watch the old recordings of "Wall Street Week with Louis Rukeyser" from those few weeks. People were a little shell shocked, but it all turned out fine.

I simply view my stocks as a claim on the future production of the world economy. If that is robust, I will be well off. If it is not, we will all be in the same boat, but I will be better off for having saved and invested.

danaht
Posts: 417
Joined: Sun Oct 18, 2015 11:28 am

Re: Investing in the current market?

Post by danaht » Fri Dec 16, 2016 8:21 pm

bligh wrote: Basically it feels like a poor time to be investing money in just about everything. So far I have been just ignoring this, and continuing to plow in more money as always. Do all of you do the same? Just look at the market, say "wow the stock market seems over valued, the bonds are probably going to return pretty poorly over the next couple of years, oh well." and buy anyway? Just expect to get crappy returns on it over the next 10 years?


Not everything is "expensive". I think it's a great time to invest in international stocks (emerging and domestic). International is still in a "lost decade" and appears to be a great value compared to US stocks.

junior
Posts: 696
Joined: Wed Sep 10, 2008 6:14 pm
Contact:

Re: Investing in the current market?

Post by junior » Fri Dec 16, 2016 8:45 pm

My IPS doesn't allow for changing allocation due to political risk... and as 9-5 suited said, surely nothing going on now is nearly as bad as Vietnam (or the Korean War or even WW II for that matter), at least not yet.

That said, based on high Shiller PE10 I'll likely go 6% less stock next time I rebalance, a little less stock than that if Shiller PE goes up more, and my equities are 39% international instead of my default allocation of 33% based on better valuations in the international markets.

These are humble tweaks here and there, hopefully they will help a little without much potential of causing harm.

swguy
Posts: 51
Joined: Thu May 14, 2015 5:27 pm

Re: Investing in the current market?

Post by swguy » Fri Dec 16, 2016 9:35 pm

Depending on what/who you read it's always a lousy time to invest. Darn good thing I don't have time to read much, as I'd never be able to retire.

magneto
Posts: 881
Joined: Sun Dec 19, 2010 10:57 am
Location: On Chesil Beach

Re: Investing in the current market?

Post by magneto » Sat Dec 17, 2016 11:43 am

bligh wrote:So just a couple of days back John Bogle himself states "It looks like a risky time to me: Stocks are fully priced".

It is obvious the US market is priced higher than historical norms.

Bonds don't look so tempting with the expectation of rising interest rates. I could go short and limited term, but the returns aren't all that great there.

Real estate isn't going to do great with rising interest rates. Unless there is significant inflation for which it will probably stay a good hedge.

My IPS is simple and does not address how I feel about markets being overvalued, or post crash. It is basically to continue to plow in money into the markets as and when it becomes available. So that is what I have been doing.


Some thoughts :-

Stocks
By one measure (Dividend Yield) Stocks are priced about 15% above the median of recent decades.
So not wildly expensive, but a 50%ish decline still of course remains possible.
And Investors far cleverer than this investor are sounding the high valuations alarm, using CAPE, q, etc.

But then Stocks are meant to be volatile.
That should be welcomed : the opportunity to add lower and reduce higher.

Some investors do what Wm Bernstein calls "over-balancing", otherwise known as Dynamic Asset Allocation or a Variable Ratio Formula Plan; Stock weightings driven by valuations; (rather than the usual Strategic Asset Allocation or Constant Ratio Plan), following in the footsteps of Benjamin Graham. But if such a decision is to be taken, then some thought is needed ahead of incorporation into the IPS, and well ahead of events.

Bonds
The 35 year bull market may at last be coming to a close, or not !!!.
Worth remembering that retail investors do not have the same pressures or needs as Institutions to invest in this area.
ST IG Corps seem one possible sweet spot/refuge?

Real Estate
Can form one of the four base corners of a 'Well Balanced Portfolio'.

So maybe some of each with cash, and then see how well the ship is constructed to weather storms, or opportunities?

Good Luck
Last edited by magneto on Sat Dec 17, 2016 11:55 am, edited 1 time in total.
'There is a tide in the affairs of men ...', Brutus (Market Timer)

jebmke
Posts: 6885
Joined: Thu Apr 05, 2007 2:44 pm

Re: Investing in the current market?

Post by jebmke » Sat Dec 17, 2016 11:48 am

swguy wrote:Depending on what/who you read it's always a lousy time to invest. Darn good thing I don't have time to read much, as I'd never be able to retire.

I was listening to Bloomberg radio on the way home from the gym yesterday. 2-3 talking heads talking about expectations for 2017. To summarize what I heard, it was basically "the stock market should go up next year but there is a chance that it will go down. Some individual stocks and some sectors will do better than others."
When you discover that you are riding a dead horse, the best strategy is to dismount.

User avatar
Toons
Posts: 12032
Joined: Fri Nov 21, 2008 10:20 am
Location: Hills of Tennessee

Re: Investing in the current market?

Post by Toons » Sat Dec 17, 2016 11:48 am

Hang around 60/40
you will be fine.
Thru all the noise that ensues
:happy
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee

JimmyJammy
Posts: 104
Joined: Sat Oct 26, 2013 1:08 pm

Re: Investing in the current market?

Post by JimmyJammy » Sat Dec 17, 2016 4:23 pm

Keep a percentage of assets in cash or short-term bonds. Like 10-15%. Then, you will *feel* like you're doing something smart and positive when you invest that money after a big DIP. For the rest, just follow the usual asset allocation advice.

heyyou
Posts: 2741
Joined: Tue Feb 20, 2007 4:58 pm

Re: Investing in the current market?

Post by heyyou » Sun Dec 18, 2016 4:19 am

My standard answer, that some are tired of my repeating it by now:
Three decades ago, the future looked bad, inflation had been too high for too long so bonds were risky, sabre rattling in Russia, China was a military threat in the Far East, and the Middle East was a mess. Today, inflation is too low so bonds have risk, there is sabre rattling from Russia, China is an economic and a military threat, and various parts of the Middle East are a mess.

Those risks produced high rewards, but it was a rough ride. Your mileage will be similar. There will be good times and bad times in both the near, and the distant future. Go ahead and invest, knowing that persevering through the market crashes will be miserable in the short term and rewarding over longer periods.

AlohaJoe
Posts: 2563
Joined: Mon Nov 26, 2007 2:00 pm
Location: Saigon, Vietnam

Re: Investing in the current market?

Post by AlohaJoe » Sun Dec 18, 2016 5:10 am

"The idea that a bell rings to signal when investors should get into or out of the stock market is simply not credible. After nearly 50 years in this business, I do not know of anybody who has done it successfully and consistently. I don't even know anybody who knows anybody who has done it successfully and consistently."

___________John C. Bogle

Ari
Posts: 446
Joined: Sat May 23, 2015 6:59 am

Re: Investing in the current market?

Post by Ari » Sun Dec 18, 2016 5:55 am

bligh wrote:It is obvious the US market is priced higher than historical norms. There is also a huge overhang of political, economic and social uncertainty with an administration that is for better or worse, very unpredictable.

Europe, Japan and China, the two other major regions by stock market cap all have issues as well. China's debt fueled housing bubble is especially concerning to me, due to how it echoes the Japanese and US housing bubbles.


Wait, so don't invest in the US because it's going too well, and don't invest in other countries because they're doing too badly? I guess you need to wait for a time when the future looks bright, profits are rising and there are no clouds on the horizon, yet the market still has really low valuations for some reason? You're gonna have to wait for a long time.

Just look at the market, say "wow the stock market seems over valued, the bonds are probably going to return pretty poorly over the next couple of years, oh well." and buy anyway? Just expect to get crappy returns on it over the next 10 years?

That's pretty much my plan, yes. Except I don't think I'll get crappy returns, because it's only the US that looks really overvalued, and that's just 20% of my stock allocation. International diversification makes me sleep well at night.
All in, all the time.

User avatar
just frank
Posts: 1286
Joined: Sun Nov 02, 2014 4:13 pm
Location: Philly Metro

Re: Investing in the current market?

Post by just frank » Sun Dec 18, 2016 6:03 am

Everything the OP has noted is true, but not actionable.

To which I would add: the animal spirits have been released from the cave they've been hiding in for 8 years.

Stay the course.

BlackStrat
Posts: 231
Joined: Wed Apr 29, 2015 9:20 am

Re: Investing in the current market?

Post by BlackStrat » Sun Dec 18, 2016 6:59 am

One thing that I haven't heard mentioned which could have a dramatic effect on the near-term market is a drop in Corporate taxes and allowing offshore money to be brought back at lower rates and invested here.

I heard yesterday a 35% to 15% corporate rate adjustment could result in a 20% increase in the market indexes.

Post Reply